The company has completed the transformation and become an integration of internet telecom value-added business, security & protection operation and media business. We predict its core business turnover in 2008 to be Rmb1.7bn (+30% yoy), of which telecom value-added business accounted for ~Rmb900mn, security & protection operation ~Rmb400mn and media business ~Rmb400mn.
As per closing price yesterday at Rmb13.43, the company’s 2008-2009E PEG is 0.8x and 0.4x respectively, lower than the industrial average of 1.2x and 0.9x. We hold that its rational PEG in 2009 is 0.6x, representing P/E ratio at 27x; rational valuation is Rmb18.75. We hereby reiterate “Overweight” rating for the counter.